The holdings are significant-some $2.2 billion-making it not only the largest transfer of risk in a year, but as Deutsche Bank noted in a client note, also the first widely distributed list to include multifamily bonds.
Fannie Mae is taking this step for a simple reason, Kimberly Johnson, Fannie Mae SVP of multifamily capital markets, says it wants to make sure it meets its goals under the conservatorship scorecard. “We are working under the direction of the Federal Housing Finance Agency,” she says. (Earlier this year the FHFA directed Fannie Mae and Freddie Mac to sell off at least 5 percent of their illiquid holdings in 2013.)
Other than that, Johnson declined to comment further on the pending sale. “We are waiting for investors to do their due diligence and put in bids, so we don’t want to say much about it until then.”
Deutsche Bank, in its note, did a quick but deep dive into the offering. All together, there are about 17 bonds in the list with an average balance of $129 million; each is 42 percent of the entire class balance.
What is also notable about the transaction is that these are-as Bloomberg describes them in its report-boom-era commercial mortgage-backed securities (CMBS). The securities are linked to apartment loans from 2006 and 2007, a source told the publication.
Deutsche Bank unearthed more information about the portfolio: it reports that 11 of the bonds have not been downgraded by any rating agency. Expect an impact on the market as a result of this sale, it also warned-albeit a limited one.
“The market has softened over the last week and the size and uniqueness of this list will put further pressure on spreads,” it concluded.
Author: Erika Morphy, globest.com